All posts tagged institutional investors

A flood of cheap money from the federal reserve was intended, in part, to kick start lending to prospective homeowners shut out of the housing market. But here’s one byproduct of that cheap money: big institutional investors, flush with financing, are cutting the little guy out of the loop and buying the houses themselves, renting them back to the kind of people who are still struggling to get home loans.

Institutional investors like hedge funds and investment houses are focusing on some of the country’s most distressed housing markets, like Florida, where prices remain low. And they’re buying up family homes in the tens of thousands.

Real estate executives say institutional investors — who in some cases are bidding on hundreds of homes a day — account for as much as 70 percent of sales in some Florida markets. Over the past two years, analysts say, they also have accounted for a majority of purchases in other parts of the country where housing prices are rebounding sharply.

The influx of investors may explain why home prices have been rising in parts of the country most affected by the housing crash, despite high jobless rates and relatively few new mortgages being issued by lenders. In the past year, prices have risen 23 percent in the Phoenix area, 15 percent in Las Vegas, 9 percent in Tampa and 11 percent in Miami, according to the Case-Shiller home-price indices . Nationally, prices are up more than 8 percent over the past year.

That 70% figure seems very high, although numbers from DataQuick show that in 2012, more than 60% of homes purchased in Florida districts like Miami and Tampa were paid for with cash up front rather than a mortgage. Cash doesn’t necessarily equal big investors, and part of it can be attributed to the nature of buyers in Florida — a higher-than-average number of foreigners and retirees, both of whom are more likely than others to buy houses with cash.